Thursday, September 11, 2014

SEC Charges Offshore Business and Two Individuals Behind Scheme to Conceal Ownership of Microcap Stocks

The SEC charged two individuals managing an offshore business intended to help clients evade U.S. securities laws with concealing the ownership of certain microcap stocks as part of a larger money laundering scheme alleged by criminal authorities.
Under the federal securities laws, beneficial owners of more than 5 percent of certain stocks are required to report their acquisition and ownership of those stocks to the SEC and the investing public.  The SEC alleges that two Belize residents through a company called IPC Corporate Services have helped clients who own significant amounts of thinly-traded microcap stocks avoid these reporting requirements.  They created associated companies through which the clients could hide their ownership and spread the shares so that none of them contained more than 5 percent of the stock of any particular microcap issuer.  They stressed to their clients the importance of staying below the 5 percent reporting threshold for each associated entity.  However, because one of the individuals and IPC owned the associated entities used in this arrangement, they assumed beneficial ownership of all the clients’ shares of these microcap stocks.  Therefore, IPC and the owner were themselves required to report their beneficial ownership of more than 5 percent in each stock. 

In a parallel action, the U.S. Attorney’s Office for the Eastern District of New York today announced criminal charges against these same individuals for violations of other federal laws extending beyond the SEC’s purview.
Read the full report here.
Post a Comment